2001 CEO PAY DOWN, BUT STILL TOPS $10 MILLION

PM&P ^ | 4/5/02

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Buffeted by a declining stock market and sagging corporate performance, overall pay for Chief Executive Officers at some of the largest U.S. companies fell 4% in 2001, to $10.46 million, according to compensation consultants Pearl Meyer & Partners. It was the first decline since 1993 as measured by the firm's survey of approximately 50 top companies and was most attributable to declines in annual bonus and stock option value.

"It's clear that 2001 was a transitional year, with companies reassessing how they deliver executive pay," said Steven E. Hall, Managing Director of Pearl Meyer & Partners. "Stock options and other forms of equity are essential elements in a balanced pay program, but it's become clear that there hasn't been enough focus on the fundamentals of running a good business. The recession is prompting a much-needed rebalancing of CEO compensation, with companies increasing the use of business and financial results as pay-for-performance measures."

The firm's study provides a preview of 2001 pay packages for top corporate officers to be reported to shareholders in upcoming proxy statements. The survey measured average total remuneration, including salary, annual bonus, long-term incentives and stock option imputed value. Because bonuses are not delivered until year end, the third-quarter survey is based on 2000 bonuses.

This year's decline in CEO pay is in sharp contrast to 2000, when CEOs broke into the eight-digit realm for the first time with a 16% pay increase. While stock options soared in value last year, the new survey reveals a 7% decline in option value, to $6.02 million, although stock options continued to dominate at 58% of total pay. Bonus was down 13%, to $1.76 million - and likely will turn out to have fallen even more steeply when actual 2001 bonuses are known. The only CEO pay components to advance in 2001 were salary, up 5% to $1.19 million, and long-term incentives, up 15% to $1.50 million.